Rights, Replicas, and Revenues: Legal Challenges in Modern Hollywood
Introduction
From the rise of artificial intelligence to the dominance of streaming platforms, the entertainment industry is evolving, and so are the battles waged on its behalf. Recently, two major strikes have shaken the entertainment world. The first, led by the Writers Guild of America (WGA), is referred to as the “writers’ strike,” and recently reached an agreement with the Alliance of Motion Picture and Television Producers (AMPTP), a coalition representing major film and television producers such as Walt Disney Studios, NBCUniversal, Netflix, Paramount Pictures, and Sony Pictures.[1] The second strike, currently in the limelight, involves actors, represented by the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA), and is known as the “actors’ strike.”[2] Like the WGA, SAG-AFTRA is in negotiations with the AMPTP.[3] The actors’ strike exposes the challenges that many of the over 160,000 actors represented by SAG-AFTRA face in their pursuit of more stable careers, increased wages, and assurances that their likeness will not be consumed or replaced by AI.[4] In stark contrast, while the writers’ strike has recently concluded, the actors’ strike persists without a deal, underscoring the intricate and evolving dynamics within Hollywood.[5] Beneath the industry’s glamorous exterior, there’s a profound narrative: artists strive for protections and continuity, while studios adapt to a transformative industry landscape. So, what exactly are the actors fighting for? How did the WGA manage to broker a deal with the studios, yet AMPTP and SAG-AFTRA have repeatedly walked away from the negotiating table with an uncertain fate??[6] Two issues have taken center stage in the negotiations: artificial intelligence and streaming revenue.
Artificial Intelligence's Role in Hollywood
In the creative world, technology often serves as a double-edged sword. Advancements can take creativity to new heights, but they can also pose challenges to the soul of artistic authenticity. This dichotomy was evident with the AI surge in late 2022. Platforms like ChatGPT made headlines, and behind-the-scenes innovations began to resonate in Hollywood. For instance, on November 30, 2022, Disney Research Studios introduced FRAN, an AI tool that significantly reduces postproduction time by convincingly aging or de-aging an actor's face in videos using a neural network trained on synthetic facial data.[7] Enticed by the prospects of increased efficiency and cost reductions, film and TV studios are exploring novel software applications.[8] However, this exploration is not without controversy, igniting considerable debate amongst Hollywood workers.
In a published statement in March 2023, SAG-AFTRA outlined its position on human artistry amidst the rise of AI in entertainment, aligning with the Human Artistry Campaign’s principles.[9] The union called for collective negotiations concerning digital simulations of performers, which it is now undertaking with the ongoing actors’ strike and negotiations. Further, in the March statement, SAG-AFTRA made it clear that if studios engage directly with performers to modify AI clauses or their IP rights regarding AI outside of the union’s existing contract framework, this would be identified as non-compliant with union standards.[10] SAG-AFTRA has also expressed concerns over intellectual property exemptions for AI developers, aiming to prevent potential artist exploitation.[11] Overall, it seems SAG-AFTRA emphasizes the importance of balancing technological advances with safeguarding artists’ rights.[12]
After the original negotiation deadline for an updated SAG-AFTRA contract expired, the actors’ strike officially began on July 14, with SAG-AFTRA and AMPTP not restarting negotiations until October 2.[13] On October 13, following a break in negotiations with the studios, Fran Drescher, President of the SAG-AFTRA union, captured the anxieties many actors harbor concerning AI’s integration into filmmaking.[14] In an interview with the Associated Press, Drescher said “[t]he thing that makes them a star is going to be ripped off, going to be turned into something that’s hardly even recognizable.”[15] More than just concerns over employment, there is a prevalent fear that the distinct quirks which define an actor’s performance could be overshadowed by algorithms.[16]
Conversely, the economic incentives for studios to adopt AI are clear. Andrew Susskind, an associate professor at Drexel University’s film and TV department, highlighted the financial benefits by pointing out the savings from not needing numerous extras in scenes like ballrooms or parties, eliminating the daily pay, food, and outfit expenses for each background actor.[17] For example, the cost of daily pay for fifteen background actors at $180/day for one week alone would save $18,900, not factoring in meals and costumes.[18] These savings could open avenues for studios to invest in other projects, potentially delivering a richer variety of content to audiences.
Building on this, a study by Bain & Company illuminated the broader scope of cost reductions, noting that AI, when used in tandem with the creative process, may achieve significant savings without compromising the creative essence.[19] For big-budget movies, the efficiencies can translate to tens of millions of dollars.[20] Such financial flexibility could allow producers to funnel funds into enhancing storytelling, fostering innovation, and exploring untapped narratives.[21] The continued integration of AI, therefore, arguably may not signal a push away from creativity but instead could pave the way for varied cinematic experiences, suggesting a possible merger between technology and artistic endeavor.
Streaming Revenue Sharing
While the implications of AI in the future remain uncertain, one technological change has undeniably reshaped the entertainment industry: streaming platforms.[22] Pioneered by Netflix’s global expansion in 2016, this revolutionizing model prompted media giants like Disney, Apple, and WarnerMedia (now Warner Bros. Discovery) to establish their own streaming services, changing the entertainment industry.[23] The success of streaming shows like Squid Game and Money Heist highlights that a film’s success is no longer solely measured by its box office tally, nor a TV show by its weekly viewers.[24] Instead, streaming rights and the viewership metrics on these platforms have become the new indicators of success.[25] For example, Netflix’s strategic mix of US mass-market and local content has allowed it to amass a staggering 238 million global paid subscribers, setting the tone for what matters in today’s entertainment industry.[26]
Film actor contracts typically consist of a base salary.[27] For top-tier stars, there may also be “back-end” deals that allow them to earn a percentage based on the film’s box office performance or other revenues.[28] Historically, these contracts were heavily influenced by theatrical releases since box office receipts were the primary revenue source for movies.[29] Thus, a successful theater run could translate into substantial additional earnings for actors with such deals. However, not every actor has Hollywood’s star power. Many actors benefit from residuals, which are payments for subsequent showings or releases of content.[30] The rise of streaming platforms is upending the residual structure, affecting how actors are compensated for repeat showings.[31] In recent times, some actors have taken to social media to highlight the minuscule residuals they receive from streaming, emphasizing the disparity compared to traditional media distribution.[32]
Streaming platforms operate on subscription models, making profit-sharing and residuals more complex.[33] In response to these changes, SAG-AFTRA was originally pushing for a deal that includes two percent of revenue generated by a series shown on a streaming platform to be shared with the show's cast.[34] However, major studios argued against this provision, claiming that the union’s proposal was generic and overlooked the relationship between program suppliers and exhibitors.[35] The studios stated that this contention was a major roadblock for them.[36] But members of SAG-AFTRA have been vocal about the widening disparity.[37] They argue that as studios pocket hefty profits from these digital platforms, a proportion should be channeled to the artists—the heart and soul behind the content.[38] SAG-AFTRA President Fran Drescher echoed this sentiment, saying, “[the studios] don’t want us to have feelings or complain that we can’t make a living and we can’t support our families and we’re having problems paying the rent.”[39] Her words bring to light the urgent financial challenges many artists grapple with in today's streaming-centric environment.
As the debate over revenue sharing and AI provisions intensifies, both sides have been drawn to the negotiating table, setting the stage for another historic deal between AMPTP and labor union.[40]
Negotiations
With both AI and streaming revenues at the heart of these negotiations, how are the discussions unfolding between SAG-AFTRA and AMPTP? The recent WGA strike and its resolution had sparked optimism in some for a similar outcome for SAG-AFTRA.[41] When the WGA concluded negotiations with the AMPTP, the union emerged with a groundbreaking deal that met its demands.[42] The terms secured by the WGA, including pay raises and certain protections against the use of AI, provided a glimmer of hope that actors could reach a satisfactory resolution as well.[43]
However, after three months of strike, negotiations between SAG-AFTRA and the studios resumed on October 2, 2023. But these hopes were short-lived, as just 10 days later the parties walked away from the negotiation table.[44] As the story developed, AMPTP stated that after reviewing the union’s latest proposal, the divide between the two parties was too vast for productive conversations.[45] The studios expressed shock at the union’s demands, especially the call for a share of streaming revenue to be allocated as a bonus to cast members.[46] AMPTP claims this proposal would result in costs exceeding $800 million annually, thus creating a financial strain it deems “untenable.”[47] In retort, SAG-AFTRA accused the studios of exaggerating the costs by 60% and resorting to “bully tactics.”[48] On October 24, SAG-AFTRA and the studios again resumed negotiations, which saw multiple scheduled meetings and adjustments, concluding with a continuation planned for the week of October 29.[49] Amidst this backdrop, on October 26, a compelling public letter endorsed by thousands of leading actors urged the SAG-AFTRA negotiating committee to firmly uphold their principles, emphasizing their willingness to remain on strike rather than accepting an unfavorable deal.[50]
Furthermore, the contention around the use of artificial intelligence remains unresolved. The union is advocating for what it sees as necessary protections against the potential replacement of performers with AI.[51] In response, the studio executive and AMPTP representatives assured that they would seek the actors’ consent before creating or using any digital replicas of their likeness.[52] However, SAG-AFTRA contrarily stated the AMPTP offer did not satisfy concerns and that the studios are refusing to protect performers from AI.[53]
The convergence of technology, commerce, and artistry in Hollywood presents both opportunities and challenges. While advancements like AI and streaming offer novel avenues for content creation and distribution, they also raise questions about artistic authenticity and compensation fairness.[54] The ongoing negotiations between SAG-AFTRA and AMPTP highlight the need for a balanced approach that prioritizes both innovation and the artists who breathe life into the industry’s creations.
Conclusion
The recent success of the WGA in securing a new three-year contract with major studios has not only cast a formidable legal shadow over the entertainment industry’s evolving contractual dynamics but has also set a potentially influential precedent for subsequent negotiations.[55] SAG-AFTRA members, inspired by these terms—including pay adjustments and AI-related safeguards—naturally harbored optimistic expectations as their union approached its own discussions with AMPTP.[56] However, the unique challenges faced by SAG-AFTRA representatives, especially their fervent demand for a share of streaming revenues and comprehensive legal protections against AI developments, juxtaposed against the studio’s concerns of impeding technological progress, have intensified the conflict and a deal has not been reached yet.[57]
The merging of streaming revenue demands, and AI provisions, paints a picture of an industry at a crossroads, struggling to balance the aspirations of its talents with the realities of technological advancement.[58] While the negotiations between Hollywood studios and SAG-AFTRA continue, their implications resonate far and wide: not only do thousands of crew members keenly await a resolution, but the ripple effects are palpably felt across the entire entertainment sector and the California economy, underlining the gravity of the halted productions.[59]
In this sphere of legal disputes, economic imperatives, and technological uncertainties, the industry stands at a pivotal moment. The outcome of these negotiations will undeniably shape the future of entertainment, as innovation continues to redefine the contours of the industry.
[1] Karen Garcia, What Can WGA Members Actually Work on During the Writers’ Strike?, Los Angeles Times (May 2, 2023, 4:10 AM), https://www.latimes.com/entertainment-arts/business/story/2023-05-02/wga-members-work-writers-strike; 2023 MBA Ratified, WGA Contract 2023 (Oct. 9, 2023), https://www.wgacontract2023.org/announcements/2023-mba-ratified; Caitlin Hernández, The AMPTP, Explained, LAist (August 14, 2023), https://laist.com/brief/news/arts-and-entertainment/los-angeles-hollywood-amptp-studios-streamers-history.
[2] Andrew Pulver & Catherine Shoard, The Hollywood Actors’ Strike: Everything You Need to Know, The Guardian (July 14, 2023), https://www.theguardian.com/culture/2023/jul/14/the-hollywood-actors-strike-everything-you-need-to-know.
[3] Id.
[4] Brooks Barnes et al., Hollywood Actors Strike TV and Movie Actors Vote for Biggest Walkout in Four Decades, The New York Times (July 13, 2023), https://www.nytimes.com/live/2023/07/13/business/actors-strike-sag; SAG-AFTRA Members Approve Strike Authorization With 97.91% Yes Vote, SAG-AFTRA (June 5, 2023), https://www.sagaftra.org/sag-aftra-members-approve-strike-authorization-9791-yes-vote; We're Fighting for the Survival of Our Profession, SAG-AFTRA (July 17, 2023), https://www.sagaftra.org/were-fighting-survival-our-profession.
[5] 2023 MBA Ratified, supra note 1.
[6] Statement From AMPTP, October 11, 2023, AMPTP (Oct. 11, 2023), https://press.amptp.org/node/19252 (describing AMPTP message after the parties walked away from negotiations); SAG-AFTRA TV/Theatrical Negotiating Committee Message to Membership, SAG-AFTRA (Oct. 19, 2023), , https://www.sagaftra.org/sag-aftra-tvtheatrical-negotiating-committee-message-membership (describing SAG-AFTRA message after the parties walked away from negotiations).
[7] Gaspard Zoss et al., Production-Ready Face Re-Aging for Visual Effects, Disney Research Studios (Nov. 30, 2022), https://studios.disneyresearch.com/2022/11/30/production-ready-face-re-aging-for-visual-effects/?utm_source=rss&utm_medium=rss&utm_campaign=production-ready-face-re-aging-for-visual-effects; Jess Weatherbed, Disney’s Latest AI Tool De-Ages Actors in Seconds, The Verge (Dec. 1, 2022), https://www.theverge.com/2022/12/1/23488336/disneys-ai-tool-aging-actors-vfx-announcement..
[8] Virtual Reality TV: How AI is Developing Film and TV Production, Pictory (Aug. 11, 2023), https://pictory.ai/blog/virtual-reality-tv-how-ai-is-developing-film-and-tv-production?el=0092&htrafficsource=pictoryblog&hcategory=video; Dawn Chmielewski and Krystal Hu, Disney Creates Task Force to Explore AI and Cut Costs – Sources, Reuters (Aug. 10, 2023), https://www.reuters.com/technology/disney-creates-task-force-explore-ai-cut-costs-sources-2023-08-08/; Dan Pontefract, Can Artificial Intelligence Help the Film Industry? It Already Is., Forbes (April 24, 2023, 8:00 AM), https://www.forbes.com/sites/danpontefract/2023/04/24/can-artificial-intelligence-help-the-film-industry-it-already-is/?sh=2d14db6848a4.
[9] SAG-AFTRA Statement on the Use of Artificial Intelligence and Digital Doubles in Media and Entertainment, SAG-AFTRA (Mar. 17, 2023), https://www.sagaftra.org/sag-aftra-statement-use-artificial-intelligence-and-digital-doubles-media-and-entertainment.
[10] Id.
[11] Id.
[12] See id.
[13] Toni Fitzgerald, SAG-AFTRA Talks Break Down: Where Does Hollywood Strike Stand Now?, Forbes (Oct. 12, 2023), https://www.forbes.com/sites/tonifitzgerald/2023/10/12/sag-aftra-talks-break-down-where-does-hollywood-strike-stand-now/?sh=64ec11f85867.
[14] Krysta Fauria, Q&A: SAG-AFTRA President Fran Drescher Reacts to Hollywood Studios Breaking Off Negotiations, The Associated Press (Oct. 13, 2023, 7:57 AM), https://apnews.com/article/actors-strike-fran-drescher-interview-efa8d2ffac5f27dcdf0b9172e2f0e187.
[15] Id.
[16] Bobby Allyn, Movie Extras Worry They'll Be Replaced by AI. Hollywood is Already Doing Body Scans, NPR (Aug. 2, 2023), https://www.npr.org/2023/08/02/1190605685/movie-extras-worry-theyll-be-replaced-by-ai-hollywood-is-already-doing-body-scan.
[17] Id.
[18] See id.
[19] Nicole Magoon et al., Tech in Content Production: Will AI Kill the Video Star?, Bain & Company (Sept. 28, 2023), https://www.bain.com/insights/tech-in-content-production-will-AI-kill-the-video-star/.
[20] Id.
[21] Id.
[22] Berfin Cezim, The Impact of Streaming Services on the Entertainment Industry, Digital Agency Network (July 12, 2023), https://digitalagencynetwork.com/the-impact-of-streaming-services-on-the-entertainment-industry/.
[23] Lucia Moses & Ashley Rodriguez, How Netflix has changed the global entertainment industry, Insider (July 27, 2023), https://www.businessinsider.com/how-netflix-is-changing-the-entertainment-industry-2021-8
[24] Id.
[25] Id.
[26] Id.
[27] The contract defines the gross receipts of the picture as the amount received by the distributor from various sources. Traditionally, the main source of revenues was that part of the box-office receipts (roughly 50 percent) that the theater rebates to the distributor. Mark Weinstein, Profit-Sharing Contracts in Hollywood: Evolution and Analysis, 27 Journal of Legal Studies 67, 85, 88 (1998), http://marshallinside.usc.edu/mweinstein/research/hollywood.pdf.
[28] Id.
[29] Id. at 75.
[30] Stephen M. Colbert, Understanding The Residuals Problem Between Actors & Streaming Services (A Full Breakdown), Screen Rant (July 29, 2023), https://screenrant.com/actors-strike-residuals-streaming-netflix-explained/.
[31] Andrew Dalton, What Residuals Are — and Why Hollywood Actors and Writers are Striking over Them, ABC News (July 19, 2023), https://abcnews.go.com/Entertainment/wireStory/residuals-hollywood-actors-writers-striking-101497038.
[32] Angela Yang, Striking actors are sharing their low residual checks on social media to make a point, NBC News (July 28, 2023), https://www.nbcnews.com/pop-culture/celebrity/striking-actors-are-sharing-low-residual-checks-social-media-make-poin-rcna96764.
[33] Colbert, supra note 30.
[34] Rick Porter, Behind the Brawl Over Streaming Revenue Sharing for Actors, The Hollywood Reporter (Aug. 9, 2023), https://www.hollywoodreporter.com/business/business-news/streaming-revenue-sharing-actors-sagaftra-1235559427/.
[35] Id.
[36] Id.
[37] Id.
[38] Id.
[39] Fauria, supra note 14.
[40] Lynette Rice, DGA On WGA Deal: “Now It’s Time For AMPTP To Get Back To Table With SAG-AFTRA,”Deadline (Sep. 24, 2023), https://deadline.com/2023/09/directors-guild-reacts-wga-deal-studios-1235555050/.
[41] Alissa Wilkinson & Emily Stewart, The Hollywood Writers’ Strike Is Over — and They Won Big, Vox (Sept. 28, 2023), https://www.vox.com/culture/2023/9/24/23888673/wga-strike-end-sag-aftra-contract.
[42] Id.
[43] Loree Seitz, SAG-AFTRA’s Duncan Crabtree-Ireland Says WGA Strike Resolution Would Give Actors a ‘Reason for Optimism, The Wrap (Sept. 20, 2023), https://www.thewrap.com/sag-aftra-duncan-crabtree-ireland-says-wga-strike-resolution-actors-optimism/.
[44] A Message From Your Negotiating Committee, SAG-AFTRA (Oct.12, 2023), https://www.sagaftra.org/message-your-negotiating-committee-0.
[45] Statement From AMPTP, supra note 6.
[46] Samantha Chery, Studios Suspend Talks With Actors After Latest Effort to End SAG Strike, The Washington Post, (Oct. 12, 2023), https://www.washingtonpost.com/entertainment/2023/10/12/sag-aftra-actors-amptp-studios-suspend-negotiations/.
[47] Id.
[48] Wendy Lee & Meg James, SAG-AFTRA Talks Break Down Over Streaming Pay in a Setback for Hollywood’s Back-To-Work Plans, Los Angeles Times (Oct. 12, 2023), https://www.latimes.com/entertainment-arts/business/story/2023-10-11/amptp-sag-aftra-roadblocks-actors-strike.
[49] Dominic Patten & Anthony D'Alessandro, SAG-AFTRA & Studios End Talks For Today; Guild Awaits AMPTP Response To Latest Proposal, Deadline (Oct. 28, 2023), https://deadline.com/2023/10/actors-strike-talks-extend-sunday-latest-proposal-1235586058/.
[50] Peter White, Thousands Of Stars Including Sarah Paulson, Chelsea Handler, Jon Hamm, Daveed Diggs, Christian Slater & Sandra Oh Tell SAG-AFTRA Leadership: “We Would Rather Stay on Strike Than Take a Bad Deal,” Deadline (Oct. 26, 2023), https://deadline.com/2023/10/actors-strike-letter-1235584852/.
[51] Patten et al., supra note 49.
[52] Samantha Chery, supra note 46.
[53] Id.
[54] See Nicole Magoon, et al., supra note 19; Allyn, supra note 16; Virtual Reality TV: How AI Is Developing Film and TV Production, supra note 8.
[55] Rebecca Klar, How Hollywood writers set a new standard for AI protections, The Hill (Oct.4, 2023), https://thehill.com/policy/technology/4235980-how-hollywood-writers-set-a-new-standard-for-ai-protections/.
[56] Mia Galuppo & Borys Kit, Actors Emboldened, Energized After Writers Deal and Ahead of SAG-AFTRA Negotiations, The Hollywood Reporter (Sept. 29, 2023), https://www.hollywoodreporter.com/news/general-news/sag-aftra-members-emboldened-wga-strike-1235603857/; Loree Seitz, supra note 43.
[57] Samantha Chery, supra note 46.
[58] Peter White, Jill Goldsmith, Andreas Wiseman, Anthony D'Alessandro & Max Goldbart, What Happens To Hollywood (And Beyond) If The Actors Go On Strike, Deadline (June 29, 2023), https://deadline.com/2023/06/hollywood-actors-strike-what-will-happen-sag-aftra-contract-1235427558/.
[59] Natalie Jarvey & Joy Press, As Actors Strike Drags On, Despair Descends on Hollywood, Vanity Fair (Oct. 24, 2023), https://www.vanityfair.com/hollywood/2023/10/actors-strike-2023-drags-on; Lisa Richwine, Hollywood Writers Union Ratifies Three-Year Labor Contract After Strike, Reuters (Oct. 9, 2023), https://www.reuters.com/business/media-telecom/hollywood-writers-union-ratifies-three-year-labor-contract-after-strike-2023-10-09/.